Financial Crime World

SOMALIA FINANCIAL REGULATORY BODIES: CBS JOINS AFI NETWORK TO BOOST FINANCIAL INCLUSION

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The Central Bank of Somalia (CBS) has joined the Alliance for Financial Inclusion (AFI) network, a move aimed at promoting financial inclusion and improving access to financial services in the country.

A Fragile Economy

Somalia is one of the poorest and most fragile countries in the world, making it highly susceptible to climate shocks and insecurity. Despite efforts by the government to reform the economy, poverty and unemployment remain pervasive, particularly among women and youth.

CBS’ Financial Inclusion Strategy

The CBS has embarked on a range of transformative activities designed to mitigate the impact of financial exclusion, including:

  • Developing a Financial Inclusion Strategy
  • Reintroducing the Somali Shilling
  • Establishing the Gargaara facility to support micro, small, and medium enterprises

Target Population Groups

The CBS is focused on promoting financial inclusion for unbanked groups, including:

  • Youth-led enterprises
  • Women-led enterprises
  • Small and medium-sized enterprises (SMEs)
  • Geographically remote residents
  • Rural and pastoral communities
  • Internally displaced persons
  • Migrants

Benefits of AFI Membership

The CBS expects to reap numerous benefits from its membership of the AFI network, including:

  • Access to a global platform for knowledge sharing and collaboration among regulators and policymakers
  • Opportunities for networking, capacity building, and technical assistance
  • Access to cutting-edge research and data on financial inclusion trends and best practices
  • Greater visibility and recognition on the global stage, which can potentially help Somalia attract investment and foster economic growth

Challenges in Promoting Financial Inclusion

The CBS has identified several challenges in promoting financial inclusion in Somalia, including:

  • Limited economic growth
  • Remittances from the diaspora providing essential funding but not sufficient for reducing poverty
  • International aid providing essential funding but not sufficient for reducing poverty
  • The country’s financial system is still in its developmental stages

Microfinance Industry

The microfinance industry is growing rapidly, but firms lack a regulatory framework for their operations. A revised Financial Institution Bill currently going through parliament will give the CBS the regulatory framework to oversee the sector.

Mobile Money

Mobile money has become the preferred mode of financial inclusion in Somalia, with over three-quarters of people over 16 years old using mobile money. However, there are geographical, gender, and age disparities in relation to access to finance.

CBS’ Financial Inclusion Strategy Implementation

The CBS is working to address these challenges through its Financial Inclusion Strategy, which includes:

  • Developing digital payment systems
  • Extending online banking services such as mobile wallets
  • Reintroducing the Somali Shilling
  • Providing guidance and technical assistance through the Gargaara facility

By joining the AFI network, the CBS aims to provide a platform for knowledge sharing and collaboration among regulators and policymakers, opportunities for networking, capacity building, and technical assistance, and access to cutting-edge research and data on financial inclusion trends and best practices.